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ICT-PSP Reporting / payments

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1 ICT-PSP Reporting / payments
Willy Van Puymbroeck 23 June 2011

2 Overview ICT-PSP Payments – essentials (excluding ‘lump sum’ Thematic Networks) Business workflow Periodic reporting including financial statements Costs level Submission of the periodic report by the coordinator Payment modalities Certification of financial statements (CFS) Controls and audits Some best practices ‘Lump sum’ Thematic Networks

3 Payments in ICT-PSP- Essentials (excluding ‘lump sum’ Thematic Networks)
Basic principles Cost reimbursement Eligible and non-eligible costs No-profit and co-financing Direct Cost Indirect Cost Reimbursement rate Maximum Union contribution Requested Union contribution

4 Essentials Some legal references
Article II.4 sets the reporting obligations Reporting periods are defined in Article 4 of the core grant agreement – includes the submission of individual financial statements Article II.5 sets the approval of reports and deliverables, time-limit for payments Includes the payment of interest by the Commission in case of late payments Article II.28 sets the frame for financial audits During the project and up to five years after the date of final payment. Article II.29 sets the frame for the technical review During the project and up to five years after the date of final payment

5 Essentials Eligible costs
Actual Incurred by the beneficiary Incurred during the duration of the project … Determined in accordance with its usual accounting and management principles Necessary for the implementation of the project Recorded in the accounts of the beneficiary Indicated in the indicative breakdown of the budget

6 Essentials Non-Eligible costs
Costs of capital employed Provisions for possible future losses or charges Interests owned Exchange losses Provisions for doubtful debts Resources made available to a beneficiary free of charge Value of contributions in kind Unnecessary or ill-considered expenses Marketing, sales and distribution costs for products and services Indirect taxes and duties, including VAT* Entertainment or hospitality expenses** Any cost incurred or reimbursed in respect of, in particular, another Community, international or national project * Unless the beneficiary can show that it is unable to recover it ** Except reasonable expenses accepted by the Commission as being absolutely necessary for carrying out the project

7 Essentials No-profit and co-financing
The Community contribution may not give rise to any profit for any beneficiary … For each beneficiary, the Community contribution may not exceed the total costs minus the receipts of the project (see Art. II.25.3)

8 Essentials Indirect costs and funding rate
Pilots Indirect costs: flat rate of 30% of personnel costs* Funding rate: 50% of eligible costs Best Practice Pilots Indirect costs: No indirect costs Funding rate: 80% of eligible costs * For calls 2007 and 2008 actual indirect costs could be used

9 Essentials Reporting requirements
During the project Periodic report (within 60 days of the end of each reporting period defined in Article 4) including the last reporting period Deliverables identified in Annex I End of the project (within 60 days) Final Report, including publishable summary covering results, conclusions and socio-economic impact of the project After receiving the final payment (within 30 days) Report on the distribution of the EU financial contribution between beneficiaries

10 Essentials Payment modalities
The Commission shall evaluate the project reports and deliverables … and disburse the corresponding payments within 105 days .. unless the time-limit, the payment or the project has been suspended Payments shall be made after the Commission’s approval of the reports and/or deliverables The Commission may proceed with an interim payment in part if some reports or deliverables are not submitted as required, or are only partially or conditionally approved The total amount of pre-financing and interim payments shall not exceed 90% of the maximum Community contribution The payments of the Commission shall be regarded as having been effected on the date on which the Commission’s account is debited On expiry of the time limit for approval of the reports … the beneficiaries shall be entitled on late interest payment … Payment to the coordinator on behalf of the beneficiaries

11 Business workflow – new ways of cooperation
Period ends Max 60 days Max 105 days …………………………………Project runs …………………………………………………………. Coordinator collects signed financial statements sent to coordinator EU check signed financial statements EU executes Payment Coordinator sends periodic report with all signed originals to EU EU check costs Beneficiaries fill financial statements EC creates NEF session Coordinator submits the Periodic Report to coordinator to access NEF through Participants Portal EC validates report yes no 1 2 3 4 5 6 Project review 7 financial statements in PDF format by to the coordinator

12 Periodic reporting Use of Participant Portal/NEF
Contractual reporting requirement By the Coordinator By the beneficiaries Use of NEF Participant Portal - Getting access: coordinator (submits), beneficiaries (data entry) Reporting/Payment sessions –several iterations possible; Commission verifies at this stage whether all information has been received. The eligibility of costs is checked once the progress report has been submitted

13 Periodic reporting Use of Participant Portal/NEF
Advantages Pro-active management Re-use rather then re-entry of contractual data Efficiency Consistency between data in the grant agreement and data in the financial statement Improve time to payment Reduce of errors Use known mechanism of ‘electronically interaction’ with the Commission

14 Cost reporting @participant level
Financial statement (see guide to financial issues) for each reporting period Costs Direct costs Indirect costs Receipts Interest Certificate on the Financial Statement Beneficiary’s declaration on its honour The individual financial statement is also to be used for adjustments to previous periods

15 Financial statement- Costs
Direct costs Personnel. Persons Must be directly hired Work on the sole technical supervision and responsibility of the beneficiary Be remunerated in accordance with the normal practices of the beneficiary Subcontracting Subcontracts may only cover the execution of a limited part of the work (specific conditions for pilot A) Must be duly justified in Annex I Recourse to subcontracts may not affect rights and obligations of the beneficiaries regarding background and foreground Annex I must indicate the tasks to be subcontracted and an estimation of the costs Other direct costs (travel, durable equipment, consumables, …) Indirect costs According to the grant agreement

16 Financial statement In NEF

17 Financial statement – Receipt
Receipt may arise from Resources made available by third parties by means of financial transfers or contributions in kind which are free of charge Shall be considered a receipt if contributed specifically to be used on the projects – it is not a receipt if the use is at the discretion of the beneficiary's management Income generated by the project Shall be considered a receipt when generated by actions undertaken in carrying out the project and from the sale of assets purchased under the grant agreement – it is not a receipt when generated from the use of foreground resulting from the project To be declared at each reporting period by each participant – to be accounted for at the end of the project (no-profit!)

18 Financial statement – Interest
Pre-financing remains the property of the Commission until the final payment The Commission shall recover from the coordinator for each reporting the amount of interest generated when such pre-financing exceeds the amount fixed in the Financial Regulation and its Implementing Rules Currently the Implementing Rules the amount has been fixed at when the amount of the pre-financing exceeds € The provision applies only to the share of pre-financing not distributed or distributed late by the coordinator to the other beneficiaries The share of pre-financing the coordinator uses to implement the project is treated in the same way as the pre-financing distributed to the other beneficiaries

19 Financial statement ‘Other’ in NEF

20 Financial statement ‘Signature’ in NEF

21 Submission of periodic report by the coordinator
One original (paper) and one electronic copy needed (Article II.4(4)) Electronic copies are provided through NEF Paper copy with all original signatures to be sent by post

22 Submission of periodic report by the coordinator
Action in NEF Progress report 1. Declaration by the project coordinator Upload scanned copy of signed declaration (coordinator) 2. Publishable summary Upload (coordinator) 3. Project Progress 4. Use of resources (only for pilots) Financial statements and financial certificates 5. Financial statements and Summary financial report* Fill in online (all) 6. Certificates for Financial Statement Upload scanned copy (where required) *simplified for TN

23 Declaration by Project Coordinator
Signed by Coordinator The periodic report is an accurate description of the work carried out for this reporting period The project (tick as appropriate) Has fully achieved its objectives for the period; Has achieved most of its objectives for the period with relatively minor deviations Has failed to achieve critical objectives and/or is deviating significantly from the schedule The public web site is up to date To the best of my knowledge, the financial statements are consistent with the report on the resources used for the project (only for pilots)

24 Submission of periodic report by the coordinator

25 Business workflow – new ways of cooperation
Period ends Max 60 days Max 105 days …………………………………Project runs …………………………………………………………. Coordinator collects signed financial statements sent to coordinator EC check signed financial statements EC executes Payment Coordinator sends periodic report with all signed originals to EU EC check costs Beneficiaries fill financial statements EU creates NEF session Coordinator submits the Periodic Report to coordinator to access NEF through Participants Portal EU validates report yes no 1 2 3 4 5 6 Project review 7 with forms C in PDF format to the coordinator

26 Payment modalities Commission has 105 days to evaluate and execute the corresponding payment No tacit approval of reports EC will pay interest on late payment After reception of reports the Commission may Approve the reports and deliverables, in whole or in part or make the approval subject to certain conditions Reject giving justification, if appropriate start the procedure for termination Suspend the time-limit requesting revision/completion Suspend the payment

27 Payment modalities Pre-financing payment Interim payments
Usually 160% of average period Community contribution Interim payments Corresponding to the costs accepted for the period Payments until the 10% retention is reached Final payment Take into account the declaration of receipts at participant level

28 Payment modalities Example
Project duration 32 months, 3 periods, Union Contribution 3 M€ Pre-financing average Union Contribution/period = 3M€/3 = 1M€ usually 160% = 1.6 M€ 1st Interim payment suppose 1M€ accepted payment 1M€ 2nd Interim payment payment 0.1M€ (retention 10%!) Final payment 0.3M€ (proviso all conditions are met)

29 Certificate on Financial Statement Requirements
Requirement specified in Article II.4(7) “ … for claims of interim payments and final payments where the cumulative amount of requests for payment by a beneficiary is equal to or superior to € “ * Auditor performs “agreed upon procedures” and provides report on factual findings The document “Certification of Financial Statements for ICT PSP projects” specifies compulsory Terms of Reference, procedures and reporting format The certificate shall certify costs, receipts and interest * The Commission may request , on the basis of an analysis of risks, the submission of a certificate on the financial statement from any beneficiary at any time until the date of the final payment

30 Certificate on Financial Statement What
Auditors perform a standard set of checks and provide information according to a specific format defined in agreed Terms of Reference (ToR) and give the Commission relevant elements to assess whether costs are claimed in accordance with the ICT PSP grant agreement ToR are given in ‘Certificate of Financial Statements for ICT PSP projects’ see ( ToR correspond to international audit standards (International Federation of Accountants – IFAC – ISRS 4400)

31 Certificate on Financial Statement Who
Beneficiaries have free choice of external auditor* External auditors must be Independent and Qualified (Directive 2006/43/CE replacing 8thCouncil Directive) For public bodies it can be competent public officers if certain conditions are met Cost of the certificate on financial statements is an eligible cost in the grant agreement * Services provided by the auditors are regarded as subcontracts and subject to the requirements of best value for money. Beneficiaries shall ensure that the rights of the Commission and the Court of Auditors to carry out audits are extended to the auditors ** Independence ‘in fact and/or appearance’

32 Certificate on Financial Statements When*
Requested EU contribution (cumulative/open amount)< €: -> No CFS to be submitted (not even at the end of the project) Requested EU contribution (cumulative/open amount)≥ €: ->CFS every time ≥ € * and when requested by the Commission

33 Certificate on financial statement Example
Year 1 EU contribution= € : No CFS because < € Year 2 EU contribution= € : CFS to be submitted (since € € ≥ €) Year 3 EU contribution= : No CFS because < € Year 1 Year 2 Final Period EU Contribution ‘Open amount’ not covered by CFS CFS Mandatory NO YES (< €) (≥ €)

34 Certificates on Financial Statement
Submission of certificate Electronically and signed original Form of Certificate A list of minimum requirements required by the Commission to be included in the engagement letter The model auditor’s report of factual findings to be issued on the auditor’s letterhead and dated, stamped and signed by the auditor (or competent public officer) A detailed description including the procedures to be performed by the auditor and the findings expected to result there from The language of the CFS should be written in the language indicated in Article 4 of the grant agreement

35 Certificate on financial statement Procedures to be performed by the auditor
Personnel cost Recalculate the hourly rate and overhead rates for personnel based on Actual payroll information and productive hours Describe time recording Description of the time-recording system and individual timesheets Employment status and employment conditions Specific employment contracts for researchers in question as well as standard employment contracts

36 Certificate on financial statement Use of Average Personnel Costs
Exceptional – only in case the relevant special clause ‘Personnel costs claimed in accordance with normal practices’* is inserted in the grant agreement In this case the auditor reconciles the following information with the accounting system of the beneficiary The number of categories The pay range, median and average of each category The upper and lower percentage variation from the average (denominator is the average) The upper and lower percentage variation for productive hours from the average (if known) A list of average rates charged in each category for the prior years The FP7 certificate on the methodology is valid for ICT PSP * ‘A beneficiary may claim personnel costs in accordance with its normal practices provided that the personnel costs determined in this way do not significantly differ from the actual costs incurred’

37 Certificate on financial statement Procedures to be performed by the auditor
Subcontracting – best value for money under conditions of transparency and equal treatment Matching with Annex I Contracts signed with 3rd party Award procedure Report which describes how the offers were obtained and assessed Other Direct costs Allocation of equipment subject to depreciation, travel cost and consumables correctly identified and allocated to the project Extracts from the accounting records together with original invoices including company policy on travel costs Indirect costs – to be assessed in case the beneficiary uses actual indirect costs Review detailed breakdown of indirect costs Details on the calculation together with a sufficient narrative description of the methodology

38 Certificate on financial statement Procedures to be performed by the auditor
Exchange rates Use of normal accounting practices Receipts Examples include income from events, rebates from suppliers, … Interest yielded Coordinator is obliged to use an interest bearing account* * Unless exemption is approved

39 Controls and audits Financial audits and controls (see Art. II.28)
during the implementation of the project and up to five years after final payment by external auditors or by the Commission services including OLAF The European Court of Auditors has the same rights as the Commission Technical reviews (see Art. II.29) At any time during the implementation of the project and up to five years after the end of the project. The Commission may be assisted by external scientific or technological experts

40 Controls and audits Financial audits to cover financial aspects, systemic aspects and other aspects such as accounting and management principles Sampling Risk based Professional scepticism Typically carried out by the external audit Unit of DG INFSO Technical reviews Typically yearly Use data mining techniques Use of external experts

41 Controls and audits Reimbursement to the Commission and recovery orders (see Art. II.30) Sums owned to the Commission may be recovered by offsetting The Commission may adopt an enforceable decision formally establishing an amount as receivable from persons other than States Penalties (see Art. II.31) Any beneficiary that has been guilty of making false declarations shall be liable to financial penalties of between 2 to 10% of the value of the Community financial contribution received by that beneficiary. The rate may be increased to between 4 and 20% .. Beneficiaries may be excluded from all Community grants

42 Some best practices General
Costs claimed must be actual Use of budgeted, standard, estimated, notional … costs is not allowed Costs that are not recorded in the accounts* are not incurred Costs must be properly documented * In ICT PSP the ‘third party’ concept as there is in FP7 does not exist. Only costs incurred by beneficiaries – who signed the grant agreement – are eligible

43 Some best practices Time recording
Person-based full time-recording system Per researcher/employee working on projects Allocating time to the different activities (research, education, management, administration, training, sickness, holidays) No estimates Properly authorized. Why full time-recording system? To be able to accurately calculate annual productive hours which are the basis for the correct calculation of the hourly personnel rate To avoid double charging time of the same personnel to several activities/projects

44 Some best practices Time recording
Basic requirements of timesheets Full name of the beneficiary Full name of the employee Title of the project Project account number Time period concerned Amounts of hours claimed on the project Full name and signature of the supervisor

45 Some best practices Direct personnel
Employment status Directly hired or In-house consultants if following cummulative requirements are fulfilled: Contract to engage a physical person Work under the instructions of the beneficiary Work in the premises (except if teleworking agreement and this is common practice for the beneficiary) Output belongs to beneficiary Cost in line with normal employment remuneration Renumeration is based on number of worked hours

46 Some best practices Direct personnel
Hourly personnel rate calculated using a correct number of productive hours Either using a standard number of productive hours for all employees, or By calculating an actual individual number of productive hours A figure of 210 working days – 1680 productive hours is considered representative in most cases

47 Some best practices Average personnel cost
Use of actual and not budgeted or estimated costs Have a sufficient number of categories Ensure that the methodology is applied in a fair manner Only when special clause is in the grant agreement

48 Some best practices Subcontracting
Award of subcontracts must be justified in Annex I Tasks concerned and estimation of costs must be indicated in Annex I Subcontractor must be chosen according to the best value for money principle using transparent procedures – if the subcontractor is known the beneficiaries are nevertheless bound to demonstrate that these conditions are complied with May only cover the execution of a limited part of the work Invoices must have a reference to the project and provide details of service or supply

49 Payments in ICT-PSP ‘Lump sum’ Thematic Networks
Simplified process based on lump sums No definition of eligible cost No actual cost reporting No indirect cost No justification of costs No provision of certificates No declaration of receipts Simplified summary financial report by coordinator (declaration of participants having actively participated in the period).

50 Thematic Networks The implementation will be using a lump sum – scale of unit approach Scale of Unit "Coordination costs" Lump sum "Implementation costs" Lump sum "Attendance of meetings costs" Coordinator 3.000€ per year and per beneficiary for the first 10 beneficiaries (incl. the coordinator) 2.000€ per year and per beneficiary from the 11th beneficiary on No additional funding from the 21st beneficiary on Costs for attendance of networks meetings and network related events are financed by a lump sum of 5.000€ per year per beneficiary Other beneficiaries 3.000€ per year per beneficiary

51 Payments in ICT-PSP Thematic - Networks

52 Payments in ICT-PSP Thematic - Networks

53 Thematic Networks – Summary financial report

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